CAL announces strategic changes to reduce costs

By Amy Su / Staff Reporter

China Airlines Ltd (CAL, 中華航空), the nation’s largest carrier, plans to focus more on the Asia-Pacific region this year by increasing routes and flights to Northeast and Southeast Asia to save on fuel costs in the face of rising crude oil prices, a company official said yesterday.

As for the long-haul routes that cost the company more in fuel use, the carrier said it would reduce the number of direct long-haul flights and deepen cooperation with other members of the SkyTeam Alliance, which CAL joined in September last year.

“Last year was a hard year for the airline industry,” CAL chairman Chang Chia-juch (張家祝) told reporters, adding that “the global economic environment will remain difficult this year.”

Rising crude oil prices, which have further driven up jet fuel costs, as well as continued weak cargo demand, will be the two major uncertainties for the airline sector this year, Chang said.

International Air Transport Association data showed jet fuel prices at US$133.9 per barrel as of Feb. 10, up 13.4 percent from a year ago and 2 percent from a month ago.

The rising trend in fuel prices, which account for about 40 percent of CAL’s overall costs, exerts heavy pressure on the company, especially for its long-haul routes.

As such, CAL will focus more on its regional business by either increasing the number of flights or routes this year, while strategically cutting direct flights for some long-haul routes, Chang said.

CAL will also launch more code-share services with its partners in the SkyTeam to maintain its service network, Chang said, adding that the carrier would continue to offer customers the same quality service.

CAL is scheduled to cut its direct flights to London and start offering code-share services on March 25.

As for its cargo sector, CAL needs to exercise better capacity control, company president Sun Hung-hsiang (孫洪祥) said.

The carrier will take a third cargo aircraft out of service in the middle of this year, after idling two other aircraft and placing them in protective storage in the US earlier this month.

CAL will pursue new markets to drive up its cargo service, Sun said.

The carrier might join SkyTeam Cargo, a global cargo alliance, to look for more opportunities in this sector, he said.

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